Environmental and Social Issues

- what investors should know about the risks

by Fergus Anckorn

22

(A VERY brief!) History of Environmental and Social Issues Management

Environmental and social Issues

Standards, guidance and benchmarks

What investors should look for

The menu

33

History of Environmental/Social Management & Mining

Don’t kill the slaves – they are expensive! Mining Acts that were aimed to protect property rights Extension of those Acts to accommodate

the new health and safety Acts introduced in the 19th and 20th centuries (water and air)

Increasing environmental awareness commencing in the 1980s with the Brundtland Commission Report on sustainable development Demands by governments, communities, shareholders, NGOs and funding agencies for improved

environmental management And into the 21st Century - Greater awareness of the need to

address social issues, climate change, sustainability……..

44

Regulations & Guidance

Mining Acts Mining permit conditions Integrated Pollution Prevention & Control Registration, Evaluation, Authorisation and Restriction of Chemicals Environmental protection legislation World Bank/IFC guidance and standards Emergency Preparedness Regulations Equator Principles International Council on Mining & Metals Country-based guidance (eg EU’s Mining Wastes BREF) Mining association guidance/initiatives (eg CN Code) Company codes, etc, etc, etc

55

(A VERY brief!) History of Environmental and Social Issues Management

Environmental and social Issues

Standards, guidance and benchmarks

What investors should look for

The menu

66

Mining issues - environmental

Exploration impacts – drilling, trenching, access roads

Discharge of wastes – fluids, tailings,

toxic residues

Use and discharge of water

Noise, dust, vibration, traffic

Land take for construction and visual influence

Closure – attaining physical, chemical, & biological stability

…………impacting on……

Air, water, soils, wildlife, people

and cultural heritage

77

Mining issues - social

Employment and immigration

Inward investment

Pressure on existing social infrastructure

Change to land use and livelihoods – community relocation

Quality of life impacts

Community sustainability – boom and bust

Health and Safety

Uncertainty

National and local politics

88

Environmental management tools

The Environmental/Social Impact Assessment Process

Environmental Permit conditions

Environmental and social (community) management planning

Closure planning

99

Impact Mitigation Measures

Adopt environmental codes (e.g. CN Code), BAT, etc;

Environmental optimisation via the ESIA – e.g. minimise footprint

Consultation with affected stakeholders

Appropriate containment of reagents, etc;

Spill contingency measures - routine;

Seveso II major accident avoidance/planning

Site clean-up and restoration/after-care

1010

(A VERY brief!) History of Environmental and Social Issues Management

Environmental and social Issues

Standards, guidance and benchmarks

What investors should look for

The menu

1111

Equator Principles - what are they?

“a financial industry benchmark for determining, assessing and managing social & environmental risk in project financing”;

Applied by Equator Principles Financial Institutions

Loans will not be provided by EPFIs where the borrower cannot or will not comply

Applies across all industry sectors, globally, to projects with total capital costs exceeding US$10M

10 Principles that extensively use IFC/World Bank guidance………………

1212

Equator Principles

Requirement to categorise projects in terms of potential impacts and risks, i.e. project screening;

Appropriate social and environmental assessment to be undertaken

Appropriate social and environmental standards to be adopted (Specifically referencing IFC Performance Standards)

Action Plan and Management System to be prepared Appropriate levels of consultation and information disclosure

to stakeholders to have been conducted Grievance mechanisms to be put in place

1313

Equator Principles

Independent review of proposals to be carried out

Covenants linked to promised deliverables to be put in place

Independent monitoring of projects to be carried out through their life

Each EPFI to prepare an annual public report on its Equator Principles implementation

…..and most significantly applies IFC Performance Standards to projects in non-OECD countries

1414

IFC Performance Standards

PS1: Social and Environmental Assessment and Management System

PS2: Labour and Working Conditions PS3: Pollution Prevention and Abatement PS4: Community Health, Safety and Security PS5: Land Acquisition and Involuntary Resettlement PS6: Biodiversity Conservation and Sustainable Natural

Resources Management PS7: Indigenous Peoples PS8: Cultural Heritage

1515

Equator Principles and Performance Standards together impose……….

consideration of third parties

and implications

consideration of supply chain

and implications

disclosure requirements

a focus on vulnerable populations

1616

Other standards

International Cyanide Management Code Mine closure standards and guidance provided by Northern

Ontario and UK Minerals Industry Research Organisation (MIRO);

Mining Wastes Best Reference (BREF) document, March 2005, APELL for Mining – guidance for the mining industry in raising

awareness and preparedness for emergencies at local level PDAC Environmental Excellence in Exploration Programme (e3) Etc, etc!.

1717

(A VERY brief!) History of Environmental and Social Issues Management

Environmental and social Issues

Standards, guidance and benchmarks

What investors should look for

The menu

1818

The Company

Track record on environmental/social management?– do they have a track record in CSR?

Are there Company Environmental and Social Responsibility Principles or Codes of Conduct?

What environmental standards do they routinely employ for exploration and project development?

Do they have people on staff with environmental training?

Do they employ appropriate international and local consultants with proven track record?

1919

The Project

What standards are being employed in the design and development of the Project?

If an exploration property, what environmental management code is being employed?

Is there a programme of public consultation and information disclosure in place?

Does the company keep records on public and community consultation?

What are the local environmental management requirements and how do these compare to international standards?

What consultancy assistance is called upon?

2020

The Modern Mining Industry’s Driving Axiom

Mining has as much to do with achieving public and potential shareholder’s confidence as it does with exploration and exploitation of mineral resources

2121

The Implications of adopting questionable standards

The Project may not be eligible for a loan from a reputable lender

The Project may have less value due to

inherent liabilities and lower bankability

NGOs may target the Project

There may be problems in retaining

existing mine property leases or obtaining new ones

Reputation risks for institutional investors

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But get it right and………..

The Project can be

– bankable

– higher value

– defendable against NGO criticism

– easier to retain licences and obtain environmental permits

– good reputation that attracts investors